The US government is arguing workers should only be protected from discrimination based on their “biological sex”, court filings have revealed.

A Supreme Court ruling in favour of the administration’s position would set a legal precedent, marking a major setback for LGBTQ rights since the Obama administration.

The court filing relates to an upcoming court case involving transgender funeral home worker Aimee Stephens, who was fired from her job after telling her employer about her transition.

“In 1964, the ordinary public meaning of 'sex' was biological sex. It did not encompass transgender status,” the document filed on Friday reads.

The 1964 Civil Rights Act states employers cannot discriminate based on sex, race, colour, religion, and national origin.

“Title VII [of the act] does not prohibit discrimination against transgender persons based on their transgender status,” the filing argues. “It simply does not speak to discrimination because of an individual’s gender identity or a disconnect between an individual’s gender identity and the individual’s sex.”

Under Barack Obama, the Justice Department decreed that Title VII did protect transgender workers. This meant Court of Appeals judges sided with Stephens in 2018.

But former attorney general Jeff Sessions reversed the government's stance after Mr Trump took office in 2017.